The Benefits of a Pre or Post Nuptial Agreement for Business Owners

July 18, 2022

Why, as a business owner, you should consider entering into a Pre or a Post Nuptial Agreement (PNA) to ringfence your business assets as “non-matrimonial property”.

Your business may be long established and even multi-generational.  It could be a flourishing company you founded and nurtured.  You may have acquired a significant stake in a large company.  It will undoubtedly be an endeavour in which you have invested significant time, money and skill.  Without a PNA, those business interests will be regarded as part of your assets or even as a joint asset, and your spouse may receive a larger portion of cash from your joint assets to offset the value of your business interests.  

Further, a PNA may prevent disruption in the event that your spouse is awarded an interest in your business or has to participate in its running.  

If you are still unsure of the benefits of a PNA, bear in mind that within divorce proceedings, you will have to disclose detailed documents and information relating to your business, and it is likely that a forensic accountant will be instructed to provide an impartial valuation of your business, at significant cost.  You will have additional legal expenses for the time it takes your lawyer to deal with this and you will have to bear at least half (if not all) of the cost of instructing an accountant.  It may also lengthen significantly the time it takes to finalise the divorce.

It must be remembered that PNAs are not legally binding because no agreement can override divorce legislation or prevent a Judge from exercising a wide discretion in deciding on the appropriate division of assets.  However, following a landmark ruling in 2010, the Courts can uphold a PNA if it is freely entered into and both parties fully understand the implications and have taken competent legal advice.  Anyone signing a PNA should therefore expect to be bound by its terms.   

For the agreement to be binding:

• The parties must meet the requirements of a properly formulated contract.  There must be no duress, undue influence, fraud, misrepresentation or mistake.  The agreement must be in writing.  

• The parties must fully and frankly disclose their financial position and a list of assets should be attached to the agreement.  

• It is wise to include a review clause because circumstances may change substantially over the years.  If the financial landscape, 20 years later, bears little resemblance to the position when the PNA was signed, it is likely that a Judge would consider that the PNA is no longer fair, and that no/little weight should be given to it.

• It must be fair to the parties in the prevailing circumstances.  It must therefore meet both parties’ needs, not cause substantial hardship and any non-matrimonial property must be clearly specified.  

• The parties should take separate legal advice.

For further advice on the above, or any other employment matter please contact Julie Long or Michael Brady.

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